Monday, June 13, 2005

"A showdown is looming"

Does Chirac's cheek know no bounds? Blair's claims that without the rebate Britain would be paying 15 times more than France to the EU (rather than just 2.5 times) are actually pretty much accurate. Yet Chirac still has the gaul (geddit?!?) to say that "Our British friends must be aware of how things are changing and therefore of the necessity of a greater fairness in the burden carried by each (member)".

So, what's the likely outcome? God knows.

Chirac can't do the decent thing and agree to Blair's calls for a rethink of the entire EU budget as this would mean France would end up having to pay more. He's just lost a major EU referendum, and the thinking in a number of quarters is that a large part of this was thanks to the proposed constitution bringing about a reduction of France's overly privileged position within the EU structure. Even though he knows full well that he's out on his proverbial posterior come the next French elections no matter what he does, he's not going to be prepared to go down in history as the guy who relegated France to a second-rate EU power, which is how any concessions would be portrayed by his opponents.

Blair, meanwhile, knows that to give up any part of Britain's rebate would make any future votes on any aspect of the EU even more unwinnable, as even with the rebate there is a lot of resentment over how little cash Britain gets back from Brussels, and how little (especially in comparison to France) the UK gets out of the EU project in general. If our Tony starts giving anything away he's going to build up an immense amount of resentment which could very easily give the Tories a superb platform with which to get back to power - even if the next general election is four/five years away. The Tories would instantly be able to claim "We won the rebate - Labour gave it away". Especially considering there are numerous signs that the economy is likely to get into trouble sometime soon, this could be a double blow for a Labour party led by Gordon Brown, who as the guy in charge of our finances would naturally also attract much of the blame.

But there is a chance that more support could come Britain's way. The Dutch are also moaning about the size of their contributions, and the longer this drags out, the more likely it is that other countries will start to look more rationally at the whole EU budget business. At the moment the rebate is a blatantly obvious, easily identifiable point of resentment, as it must seem odd that one of the richest member states gets such a large lump sum back from Brussels. But if they start to think about it for a moment they'll surely see that the amount of money France gets through other means is significantly greater in its unfairness. At that point, we could find ourselves with a situation whereby the rest of the EU start teaming up against both Britain AND France, and start telling us both to get stuffed.

Of course, for a numerical illiterate like me it's fairly hard to work out what a "fair" budgetary system for the EU would actually involve. It's all overly confusing even to people who understand the thing. Labour MEP Terry Wynne has some handy tables and explanations and the like trying to give an idea of how the thing works. Judging by that, it's not going to be easy.

The only thing that is certain is that, as two of the richest member states, Britain and France should - by the fundamental logic of the thing - be paying out rather more than the poorer ones. It's a kind of Robin Hood take-from-the-rich, give-to-the-poor scenario (or dangerously socialist, if you're that way inclined). At the moment, however, it is - as so often - France which is getting by far the best deal. It is, therefore, towards France that any resentment should really be directed. As I optimistically semi-predicted last month,

"France has continued to hold an influence in excess of her size or economic might ever since the 1950s, and a French “Non” would simply make this even clearer to the other EU member states. They would see France as voting against to maintain her own power, not for the good of the Union - and in subsequent renegotiations, France would find herself with too much resentment and opposition to get her way, just as would Britain."

The longer Chirac refuses to even consider the prospect of a rethink, the more the irritation with France will rise. While this may not mean that Britain gets her way, it should at least mean that the French are forced into making some kind of concession. If not, it could be France, rather than Britain, which becomes the black sheep of the EU family.

With enlargement, the rebate was always going to have to be rethought. But so was the rest of the EU budget. Chirac is playing a very dangerous game, and one that is likely to backfire. Meanwhile, all Blair has to do is hold out and keep pinning the blame on Paris, and he should be able to sort something out. It won't be as good a deal as we've currently got, but post-expansion it was never going to be.

8 Comments:

Anonymous said...

"But there is a chance that more support could come Britain's way. The Dutch are also moaning about the size of their contributions, and the longer this drags out, the more likely it is that other countries will start to look more rationally at the whole EU budget business."

Yeah, but the Dutch are loudly objecting about the rebate. Even more than France as they pay far more per capita and get no "rebate". The system is unfair primarily to the Swedish and the Dutch who pay significantly more per capita than Britain and get no "rebate".

As for the CAP, it is a separate issue. I don't understand why Britain is so obsessed with France. You economy is comparable to the German one, not the French one. You should be paying as much as the Germans, not the French.

Furthermore, it is a distortion to say that you are paying more. You're not. You're paying significantly less than France. You just get less back, because you have no agriculture to speak of.

There are two separate issues here. One is the fundamental principle of equal rules applying to all member states. Until we get fairness there, we can forget further integration. Britain stands alone there pushing its own national interests at the cost of the other member states.

The second issue is more general as on what the EU should spend its money on. Is it reasonable that 40% of the budget goes to agriculture, when only 2% of EU's population work in that sector? Probably not. But that is a separate issue.

And again, drop the France fixation. You are starting to sound like the Yanks did in the prelude to the Iraq war. It's not just Chirac speaking up against the "rebate". It's every other EU state.

_Britain stands alone there pushing its own national interests at the cost of the other member states._

Are you mad? Or French? Every country to a certain extent pushes its own agenda (viz. Ireland's reluctance to let new members eat at the trough they've been gorging since the 1980s), but France are the masters. Unfortunately, Chirac has overplayed his hand this time. IMHO, he really doesn't want other members looking closely at the EU budget. Yes, the UK rebate will stand out straight away as unfair (which it is), but the very next thought in any analyst's head is going to be 'what's the net contribution of each country, overall'? It's not a separate issue, as you imply, but one of the fundamental problems with the EU as currently made.

In any case, it's all a transparent strategy by Chirac to deflect attention away from his referendum embarassment. The sooner France and Europe are rid of him the better for both. He's a lame duck, just one making a noisy exit.

You need to look at it as separate issues or you'll just end up in the regular business of negotiation-by-blackmail. How the EU budget is spent must be handled on EU level and should not be directly tied to the member states. Otherwise you'll get an incoherent mess due to all the exceptions the various states are demanding. France wants subsidies for agriculture, Britain for the service sector, Germany for industry, Denmark for shrimping business etc As these things have to be agreed on unanimously, the effect is that you can easily blackmail the EU to get your will.

The system cannot work that way. The priorities have to be set at an EU level, so the average European gets the most benefit of them. Hence the spending cannot be a member state national interest.

It's nothing outrageous with that, it works the same way everywhere. Take a look at the UK. Does England get a "rebate" because it doesn't have as much agriculture as Scotland? Does Wales get a "rebate", because their security arrangements cost less than the ones in Northern Ireland?

Lucas - no claims here that the rebate is overly justified. But it's very hard to get a satisfactory budget agreement. For starters, it's practically impossible to work out how "fair" the current system is.

The difficulty is that I can't seem to find any particularly useful tables showing the actual gross amounts paid by each member state compared to their respective national wealth compared to the amounts they receive back and net contributions. Which is very odd, as that strikes me as the sort of easy-to-understand graph which should be knocking about fairly readily. The information (for 2003) is probably all in this .pdf, but it would take forever to trawl through and work out direct comparisons between member states. And in any case, since enlargement this would no longer have much relevancy.

The logical thing (as far as I can tell) if for each member state either to chuck a set percentage of their GDP/GNP/whatever into the collective kitty. If that were the case, from what I can tell (and as is obvious from other posts, I'm useless with numbers) Britain would only be paying out slightly more than France and slightly less than Germany. As it is, Britain and Germany seem to pay out a fairly significantly greater percentage than France, and France (though a net contributor) receives significantly more back via the CAP.

Of course, even with renegotiation the problem would remain that there would be net contributors. As long as that's the case, there will be resentment and people asking why the hell they should pay so much to the EU while not getting any tangible return on their investment. That's even more of a cause for complaint than looking at contributions per capita.

But, as I say, without definite and easily comparible gross/net figures compared to national wealth (which I still can't seem to find anywhere), it's very hard to tell precisely what the situation would be. If anyone knows of where this sort of thing can be found I'd be grateful if you could let me know.

(As is probably obvious from the above, I get very confused when having to think about numbers - I really can't face going through and doing the maths myself...)

The situation is like this: Without the rebate Britain would be paying about the same amount as France. Today Britain pays less.

That's however only the Member state-->EU cash flow. France gets a shitload back in the other direction EU--->Member state, whereas Britain gets less. This is not however personal against Britain - it is a consequence of the fact that EU spends a lot of money on agricultural subsidies (~40% of the budget).

Now, when I'm arguing that the "rebate" is unfair, I'm not talking about France losing money. It's because there are plenty of other EU states (Sweden, Netherlands etc) that don't have any agriculture either, but they don't get a rebate.

I fully agree with you that the preferred system would be a percentage of GDP. Or perhaps something like a tax at Union level (it would skip the middle hands, thus possibly saving money).

In context, the ones that really get screwed are the Germans.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29

3 Germany 2,906,658 4 United Kingdom 2,295,039 5 France 2,216,273

Germany has a slightly higher GDP than UK/France, while they are paying far more. The reason for this is that they've been open to compromise to further European integration. France and UK on the other hand have gained advantages through obstructionism and direct blackmail. (Although Germany did the same with the stability pact, which pissed the Dutch off).